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When can you offset costs against damages?

7 October 2014

In the case of Mploy Group Ltd v Denso Manufacturing UK Ltd (2014) Eder J allowed a stay of execution where the judgment creditor (M) was unable to confirm whether the terms of it’s after the event insurance policy would cover the costs it had been ordered to pay to D. The terms of the policy would not allow M to reveal whether the costs would in fact be paid. M had been awarded judgment in the case but ordered to pay D’s costs. Unfortunately, M had entered into a Company Voluntary Arrangement and D was clearly concerned that the costs would not be paid and applied for a stay of execution under CPR r.40.8A.

The stay was granted despite M arguing that there were no special circumstances as they had continued to trade, and were entitled to the damages awarded to them under the judgment and the ATE policy covered costs.

Eder J held that the main consideration when granting the stay was that the costs payable by M far outweighed the judgment debt payable by D.

Defendants should be wary when about to hand over damages and should think tactically about costs and whether a similar course of action may be appropriate.

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